Frac-sand producers Hi-Crush Partners (HCLP) and Emerge Energy Services (EMES) have surged nearly 174% and 140%, respectively, so far in 2016. The upswing in their stock prices, which started in 2Q16, has continued so far. Fairmount Santrol Holdings (FMSA) has risen 258% year-to-date.
In this series, we’ll look at the reasons behind this surge. We’ll also discuss the key factors that may drive these stocks in the future.
Factors impacting frac sand producers
The above graph compares the year-to-date stock prices of Hi-Crush Partners (HCLP), Emerge Energy Services (EMES), Fairmount Santrol Holdings (FMSA), U.S. Silica Holdings (SLCA), and the Alerian MLP ETF (AMLP).
Hi-Crush Partners is a pure play producer of monocrystalline sand, a specialized mineral used as a proppant to enhance the recovery rates of hydrocarbons from oil and natural gas wells.
EMES manufactures Northern white silica and Texas sand, which is a key input for the hydraulic fracturing of oil and gas wells. With the sale of its Fuels business, Emerge Energy Services also became a pure-play silica sand producer.
All the frac sand producers saw increased volumes in 3Q16 after declines in the previous three quarters. Drilling activity increased in the second half of 2016 as reflected in the increase in rig counts. This resulted in higher demand for proppants, contributing to better results as well as higher stock prices for the frac-sand producers. Drilling activity levels will pave the way ahead for these companies.